Abstract
Under the provisions of the Information Technology Act, 2000 particularly Section 10-A, an
electronic contract is valid and enforceable.
The only essential requirement to validate an electronic contract is compliance with the
necessary pre-requisites provided under the Indian Contract Act, 1872.
Also, the courts in India give due regard to electronic contracts under the provisions of the
Indian Evidence Act, 1872.
The provisions of the Information Technology Act, 2000 (IT Act) give legal recognition to
an electronic (E -Contract) particularly section 10-A of the IT Act which states:
“Section 10-A: Validity of contracts formed through electronic means. –
Where in a contract formation, the communication of proposals, the acceptance of
proposals, the revocation of proposals and acceptances, as the case may be, are expressed
in electronic form or by means of an electronic record, such contract shall not be deemed to
be unenforceable solely on the ground that such electronic form or means was used for that
purpose.”
The above provision was introduced by the Information Technology (Amendment Act),
2008 after recognizing the growing dependence on electronic means to reach commercial
agreements. This applies where contract formation, communication of the proposal and
acceptance is carried out electronically.
How E – Contracts Can Be Entered Into: E-Contracts can be entered into through modes
of communication such as e-mail, internet and fax. The only essential requirement to
validate an E-Contract is compliance with the necessary pre- requisites provided under the
Indian Contract Act, 1872. Which are:
- Offer and Unconditional Acceptance – Which may be made online or by e-mail
communication. - Lawful Purpose and Consideration – A contract is enforceable by law only when it
is made for a lawful purpose and for some consideration. It must not defeat any
provision of law and must not be fraudulent in nature. - Capacity of Parties and Free Consent – Parties to a contract are capable of entering
into a contract, if they satisfy the requirements of Section 11 and 12 of the Indian
Contract Act, 1872 (capacity to contract), and consent of the parties must be free as
per Section 13 of the Indian Contract Act, 1872.
The simplicity of the execution of an E-Contract being confounding, many sometimes
wonder about its validity, especially when compared to a traditional written contract. The
simple truth lies in the fact that the Indian Contract Act, 1872 has not specifically laid out
any specific way of communicating an offer and what constitute its acceptance. The same
can be achieved verbally, in writing or even through conduct. This shows that even in its
simplicity, an E-Contract is as valid as a traditional written contract; the only condition/
requirement being that an E-Contract should possess all the essentials of a valid contract as
mentioned above.
Unless an inference can be drawn from the facts, that the parties intend to be bound only
when a formal agreement has been executed, the validity of an agreement would not be
affected by its lack of formality. Hence, once the parties are at consensus-ad-idem, then the
formal execution of the contract is secondary. Therefore, once an offer is accepted through
modes of communication such as e-mail, internet and fax then a valid contract is formed
unless otherwise specifically provided by law in force in India; such as the Registration Act,
1908, the various Stamp Acts etc. Also, Section 1(4) of the IT Act lists out the instruments
to which the IT Act, does not apply, which are as follows:
- Negotiable Instruments;
- Powers of Attorney;
- Trust deeds;
- Wills;
- Contracts for Sale or Transfer of Immovable Property
Kinds of E-Contracts
1.Browse Wrap Agreements
This agreement is considered as a browse wrap agreement which is intended to be binding
upon the contracting party by the use of the website. These include the user policies and
terms of service of websites such as Flipkart or E-bay and are in the form of a “terms of
use”, a “user agreement” or “terms of service”, which can be used as the links at the corner
or bottom of website. - Shrink Wrap Contracts
These contracts are the license agreement by which the terms and conditions of the contract
are enforced upon the contracting parties and are usually present on the plastic or in
manuals accompanying with the software products which the consumer buys. - Click Wrap Agreements
These agreements require the user to give his consent to the terms and conditions which are
known as end user agreement and governs the licensed usage of the software by clicking
“Ok” or “I agree” button. There are certain kinds of check which ensures that the terms of
the agreement are binding upon the contracting parties. These are as follows:
1.The user agreement or the terms of service must be specifically conveyed to the party. By
simply inserting a link to the terms on the website without drawing any attention of
the user shall not be considered as the intimation to user. Therefore, if the user
continues to use the website after the intimation of the terms shall be considered as
the acceptance of the contract.
2.The terms of the agreement should not be changed if the user has given his assent for the
particular action.
3.The changes made to the terms of the agreement must be specifically intimated to the user
which providers a user to give a fresh consent for the modifications in the terms. In
case the user does not agree to the changes then he has the option to leave the
website at that very moment
Execution of E-contracts
The recognition and regulation to E-Contracts is provided by various laws such as
Information Technology Act, 2000 and the Indian Evidence Act, 1872. The provisions in the
I.T. Act mention about the attribution, acknowledgement and dispatch of electronic records
and secured electronic procedures.
The IT Act recognizes the basic features of the contract such as the communication of the
proposals, acceptance of proposals, revocation of proposals and acceptances, as the case
may be which could be expressed either in electronic form or by means of an electronic
record.
Further, the recognition of a contract is accorded under the Indian Evidence Act, by which
the term “document” includes any information contained in an electronic record which is
printed on a paper, stored, recorded or copied in optical or magnetic media produced by a
computer. Such information are in conformity with the conditions of Section 65B of the Act
which shall be admissible in any proceedings, without any further proof or production of the
original document before the concerned authority and shall be regarded as an evidence of
any content of the original or any fact stated therein of which direct evidence would be
admissible.
Electronic Signatures
The Information Technology (Amendment) Act, 2008 has substituted the term ‘digital
signature’ with the term ‘electronic signature’. A digital signature is the technology specific
and is irreversibly unique to both the document and the signer. However, an electronic
signature is technology unbiased and general in nature. However, there is no standard for
electronic signature. It can be either a typed name or digitized image of hand written
signature. The substitution of the term ‘digital signature’ with ‘electronic signature’ is meant
to expand the scope of E-contracts in an e-commerce world.
Recognizing the change in the execution of commercial transactions the Supreme Court
disregarded the argument that exchanges over e-mail did not qualify as contracts and held
that “Once the contract is concluded orally or in writing, the mere fact that a formal contract
has to be prepared and initialed by the parties would not affect either the acceptance of the
contract so entered into or implementation thereof, even if the formal contract has never
been initialed.”Thus, the e-mails which convey the clear intention of the contracting parties
can be treated as a binding contract
Evidentiary Value of Electronic Records: The courts in India recognize electronic
documents under Section 65-A of Indian Evidence Act, 1872. The procedure for furnishing
electronic documents as evidence is provided under Section 65-B of the Indian Evidence
Act, 1872.
As per Section 65-B of the Indian Evidence Act, 1872 any information contained in an
electronic record produced by a computer in printed, stored or copied form shall be deemed
to be a document and it can be admissible as evidence in any proceeding without further
proof of the original. But, admissibility of the same is subject to various conditions
prescribed under section 65-B of the said act. It is required that the document or e-mail
sought to be produced from a computer, was in regular use by a person having lawful
control over the system at the time of producing it; the document or the e-mail was stored or
received during the ordinary course of activities; the information was fed into the system on
a regular basis; the output computer was in a proper operating condition and has not affected
the accuracy of the data entered.
Conclusion: It may be concluded that where various steps of a contract have been affected
through electronic means, the parties are at consensus-id-idem and such an agreement
fulfills all the essentials of a valid contract under the Indian Contract Act, 1872 mentioned
above, then, such contract is valid and legally enforceable